There are two core billing models—outside of salaries within full time employment—used for design services that I know of:

1. fixed price
2. time and materials

There are a bunch of others but they are all more-less derivative of these basic two.

The fixed price model is an obvious one where the buyer expects a clear price for whatever it is that they are buying.

This is tricky for services due to various unforeseen issues which might pop up along the way. People change their minds, their understanding of the projects change, and goals evolve.

This is really tricky for design. Most of the time design work is agreeing to create something which is at that point in time completely unknown. A lot of the times you need to discover what the problem is, and then solve it. This makes it really tricky to put a price on.

It's perfectly adequate for selling goods, though, which is where the pricing model comes from.

In order to avoid having to quote higher “just in case”, or to avoid your costs going over the quote, a new billing method was invented within construction and engineering practices: time and materials.

The time and materials model has been created and adopted as an alternative to the fixed price model. It takes the invested time as the input, puts a price on that unit of time, adds the materials used, and by adding them together you get the final price for the service.

This model was better suited for creative services such as design and software development because it is even simpler: we hardly use any materials at all, it's just the amount of time spent. And time spent on a task correlated pretty well towards complexity or size of the task at hand. There were some issues with efficiency being penalized, but that is kind of taken care of with higher rates, so I won't really go into that here.

The one time and materials derivative billing model worth mentioning in my humble opinion is the retainer/subscription model. Retainers being a fee a client pays in order to reserve capacity from a creative service provider, and subscriptions being just a really clever re-imagination of retainers.

So for the longest time the most accurate way—and one could argue the best—we could price our services relied on the quantification of time humans spent on labor. As long as we all could agree on the amount of time spent was realistic, we had a good enough system to work within. It wasn't perfect, it was good enough.

For what it's worth, Superawesome was experimenting with billing models from practically day one of our operation. I invented our own models where we introduced what I called “productivity multipliers” to time and materials. There was bartering, equity, all kinds of things.

So, when we quantify work through time, we can see where AI makes this billing model choke: humans aren't doing the work anymore; well, at least not all of it, yet.

In other words humans are now responsible either for telling someone—or something—what to do, or instructing it how to do it and setting up the infrastructure/environment which will execute the work.

Time as a unit of labor isn't working anymore, because the amount of human involvement has been severely cut down. The new business wants to use as little human labor as possible, and wants most of the “manual labor” to be done by machines. This is why it's important for us as creatives to lean into the parts of our work which can not be easily automated or outsourced, because these are the only parts of the work that are left to the humans.

So how do we continue getting compensation for our work in the future that will have us either direct or operate, but not execute the work itself?

I can see both fixed price, and time and materials continue to work. In fact, I think that fixed price billing will make a big comeback because people are incentivized to cut their costs. You name your price, and figure out a way to do it as cheap as possible, but now with less exploitation of human labor.

The price of work performed by humans who direct will surely significantly increase. Those who decide to operate will need to redefine their work, tools, and the perception of what they do is. And now that we have AI, we have “materials” to bill for: tokens, context, inference, or whatever else they might call it.

I can totally see people invoicing for LLM usage going forward, if they continue to rely on time and materials billing.

There are interesting new opportunities forming where people will train their own models—maybe for very, very niche requirements—and charge for them on subscription or license based models.

However, I do see fixed price billing evolving, and leaning into what we call value based pricing. This means pricing based on the value you've provided, not the costs you've incurred.

AI brings a massive opportunity to creatives to start charging based on the potential of the outcome. Why? Because the cost of this opportunity is lowest it's ever been. A handful of people or even a single person with the help of AI can deliver massive value at insignificant cost incurred, compared to before when that kind of work required involvement from a lot more people and therefore cost a lot more to engage.

There is a whole gamut of options to be explored within what we will call value based pricing. Charge for the number of assets produced, new customers acquired, etc. This plays in perfectly for agencies who want to evolve because it requires that they have agency, and requires the clients to enable this agency. No one is going to achieve any success if they aren't allowed to exercise their decision-making, so creatives are going to get to have some skin in the game. This means leverage, this means an opportunity to charge according to the amount of risk being taken, cost of initial investment, etc.

Things are going to get really interesting, really soon, and honestly I'm here for it. I can't wait to engage with clients who are open to new and innovative setups of compensation for creative services.

Going forward, I know that Superawesome will work hard towards incorporating “opportunity identification” and try to get work based on that, instead of simply waiting for opportunities to be spotted by clients and hoping to be selected for their execution.

Looks like it's a good time to make creative services exciting, and attractive again.

1

Error happened.